Croatia candidates battle over tax cuts ahead of September polls

By Igor Ilic

By Igor Ilic

Photo:

By Igor Ilic

ZAGREB (Reuters) - The top two contenders in Croatia's general election battled on Friday over who would be best placed to cut taxes and boost growth, in a televised debate that put the economy at the forefront of a ballot that might not end a political deadlock.

Croatians vote on Sept. 11 for the second time in less than a year. Zagreb needs decisive reforms to fix its fragile public finances, improve the investment climate and spur growth and reduce public debt standing at 86 percent of GDP.

"There will be no new taxes. A reduced tax burden will be compensated by stronger growth while being careful not to threaten financial stability," said Zoran Milanovic, leader of Croatia's biggest opposition party the Social Democrats (SDP).

The conservative HDZ party's income tax cut promises were going too far and would take much-needed money away from municipal authorities, he said, adding: "Those who plan such a high non-taxable level on salaries simply don't know how the budget is structured and planned."

HDZ new leader Andrej Plenkovic retorted that his party planned a much-needed overhaul of the tax system.

"We aim for a thorough and balanced tax reform that would enable citizens to spend more and would ease the burden on businesses," he said.

The election comes as Croatia, one of the weakest European Union economies, is still hauling itself out of six years of recession between 2009 to 2014.

Next year is particularly challenging financially, as Croatia will need almost 30 billion kuna ($4.47 billion) just for refinancing bonds and interest payments.

Milanovic, who was prime minister from 2011 until elections last year and Plenkovic, whose party won in November and then ruled a fragile coalition for only five months, both promised to lower the tax burden for citizens and businesses.

Milanovic said his party wanted talks with Hungary's energy group MOL on regaining control over Croatia's energy firm INA. MOL and Zagreb share ownership over INA, but have been at odds for years over management rights and investment policy.

According to an opinion poll, conducted earlier this month, an SDP-led coalition with three smaller parties is ahead with the support of 34.4 percent of voters, while the HDZ was backed by 26.4 percent of voters.

A large number of undecided voters will be key, however, analysts said. If Croatia gets another hung parliament, as many expect, opinion polls say the likely kingmaker would once again be the reformist Most party, or Bridge, which now has the support of about 10 percent of voters.

Most, which plays on dissatisfaction with the top parties, was part of a center-right coalition with the HDZ that collapsed in June due to a row between key coalition leaders.